Tips for Selling Your Life Insurance

A life settlement is a transaction in which an individual sells his or her life insurance policy to someone other than the insurance company which issued the policy. Prior to the creation of these transactions, if you owned a policy that you no longer wanted, you had two choices – either you could surrender the policy for its cash value or allow it to lapse. In today's economically unstable environment, many people unfortunately may need the money they had set aside for tragedy now. In some instances, the elderly are no longer capable of even keeping up with their premium payments.

The way a life settlement works is that the purchasers of the settlement pay off the policy holder in a lump sum and then typically either hold the policies to maturity, a death, for example, and then collect the benefits for themselves. The amount that the settlement is worth depends upon a few factors, such as the insured person's age and health, as well as the terms and conditions of the policy. In some instances, a life settlement can be worth up to 8 times as much as just selling your policy back to the bank that issued it. Here are two tips that experts agree should be taken into consideration when preparing to complete a settlement:

1. Research the Facts – While a death benefit can be tax free, a policy that's cashed out isn't. If you plan on selling your policy, make sure to consider the taxes you will be paying, as well as all other fees associated with the sale, in your calculations. Keep in mind that the offer price will typically be well below the face value of the life insurance policy; the seller can receive around 50 cents for each dollar of "intrinsic" value in a sold policy.

2. Find the Best Company to sell to– This will probably be one of the biggest economic decisions of your life, so it is definitely not one to be taken lightly or made quickly. Find the best company and the deal possible. Experts also recommend that you never agree to a settlement without a written offer from the buyer. Make sure to select a financial professional who has experience with life settlements that can explain all of the moving parts of the deal, including the specific repercussions for you. Remember, the sale of the policy is irreversible and should not be done hastily. 

In the still recovering economy, people need money now. Selling your life insurance and completing a life settlement is a viable option for those in need of immediate funds.